The Car Propping Up the US

The car industry has long been considered too big to fail in America. The car manufacturers employ tens of thousands of mostly union members, not to mention sales, marketing, and transportation to market. Clearly, if no one buys cars it would seem self-evident that the steel industry and the petroleum industry would be greatly affected, but economists say the impact can be felt as far afield as healthcare and agriculture.

The news cycle has been dominated by recent political wrangling over keeping the parts and components of cars domestically manufactured as well, from haggling with Canada over steel, to haggling with Mexico over assembly, to threatening tariff wars with China over parts.

They’ve Been Connected from the Start:

The direct tie between the American Economy and automobile manufacturer was first recognized in the 1940s as “Fordism”, the phrase invented by Antonio Gramsci, a Marxist philosopher. Ford had the idea to pay workers more money $5 a day (the equivalent of $90 today). The first effect was actually to decrease the city population as more people moved to suburban areas. Motorized transport, in general, made the population more portable, allowing working-class citizens access to opportunity and freedom.

Recent Historical Context:

A quick check of recent history confirms that when the economy dives it takes the car industry with it. Take the housing, bank, and stock market crash of 2008 for example. In that year alone around 52,000 workers in the automobile industry became unemployed. So what happened to those people?

Most states do not have that many automobile workers. So most of those job losses were in states such as Michigan. When unemployment happened to people here the only answer seemed to be to leave the state entirely. Between the years of 2001 and 2009, Michigan lost the equivalent of one resident every nine minutes (or 465,000 people), the equivalent of a small town. Luckily this wasn’t a permanent fixture the state did recover if only a little way.

Predictions of the Near Future:

If a drop in car sales impacts the economy and vice versa then even a slight drop in car sales is an indicator of potential economic disaster.

That is why the industry starts getting rattled if there seems to be a drop in car sales, which might be happening right now in 2018. 2015 and 2016 recorded sales years for new cars, when the NADA released its forecast for 2017 & 2018. The 2017 number was 17.1 million, a modest plateauing in sales, which they pretty much hit. Their 2018 number was only 16.7 million, a 2% drop from 2017 sales numbers.

Why the negativity? One could point to the end of the impact of the Cash for Clunkers government buyback. Fear over rising fuel prices, rising interest rates, and the rise in vehicle sticker prices. In reality, though, millennials aren’t buying cars the way previous generations did. Remote work has become attractive, especially in younger workers.

There is good news for the economy on the whole and gas prices have been fairly stable. However, many of the unfilled jobs are in blue collar jobs which means until they’re filled people aren’t driving to work. The job growth is primarily in areas which can be done remotely. In many ways, as the car and the economy go hand in glove, gas prices will continue to be the key indicator to watch.

What’s the Worst that Could Happen?

But look at it like this: There are 226 assembly plants in America. If they all were to disappear tomorrow the effect would be catastrophic.

But not all the impacts of the motor car are economic. Currently, about 85% of American people drive to their jobs on their own. The effect of this is not only financial, something you must do to earn money; it also has a distancing effect on our fellow humans. As we spend several hours behind the wheel trying to get to and from work each day, many people are struggling to feel like they’re more than just part of a large machine.

This is why we at the Kicker have long encouraged the commuting public to remember the romance we once had with our car. If we can fall in love with the experience of driving again, and keep buying cars, we can keep our economy strong and free.